IMF Unlocks Up to $18 bln for Ukraine’s Shattered Economy
TEHRAN (Tasnim) - The International Monetary Fund agreed to grant Ukraine between $14 billion and $18 billion to help the country avoid a default. The package is vital for securing further help from other international lenders like the World Bank and the EU.
The IMF promised to grant Kiev the lifeline over the next two years, after finishing its mission in Ukraine on Wednesday. Overall support from the broader international community will stand at $27 billion over the period, the IMF statement said.
“The agreement reached with the authorities is subject to approval by IMF Management and the Executive Board. Consideration by the Executive Board is expected in April, following the authorities’ adoption of a strong and comprehensive package of prior actions aiming to stabilize the economy and create conditions for sustained growth," the document specified.
The money will help to stabilize Ukraine's economy and compensate for the damage incurred by four months of unrest across the country.
However, the IMF funds come with stringent terms; it is asking for a number of economic reforms particularly in energy, RT reported.
“Energy sector reform will focus on reducing this sector’s fiscal drag, while attracting new investment and enhancing efficiency. A key step is the commitment to step by step energy reform to move retail gas and heating tariffs to full cost recovery, along with early action towards that goal,” the IMF said.
The IMF promised the energy reform “will be accompanied by scaled up social protection to mitigate the impact on the most vulnerable. Over time, the program will focus also on improving the transparency of Naftogaz’s accounts and restructuring of the company to reduce its costs and raise efficiency,” the IMF said.
On Wednesday Ukraine's coup-appointed leaders agreed to unpopular IMF conditions to increase domestic gas prices 50 percent from May 1. For a long time the IMF has been asking Kiev to cut its energy subsidies which, it says, cost 7.5 percent of Ukraine's GDP in 2012.
The IMF conditions could turn out tough for Ukraine, and “the government needs to pay special attention to compensation mechanisms,” as Olena Bilan, an economist at Dragon Capital, warned earlier in an interview with Bloomberg. “A sharp drop in purchasing power may fuel the ongoing instability in eastern Ukrainian regions.”
The European Commission proposed a 11 billion euro ($15 billion) package for Ukraine three weeks ago, saying it’ll unlock the funds once Ukraine signs a deal with the IMF.